Last Update: November 2013
Commentary on the recent development of price indices
In October, FAO’s indices for oilseed prices and meal prices remained about unchanged compared to the previous month: while the former gained 1.5 points, the latter lost 1 point. Meanwhile, the index for vegetable oil prices move upward for the second consecutive month, gaining 4 points (or 2 percent). In historical terms, the oil price index continue to fare well below the levels recorded in the last two marketing years (making reference to the corresponding months), and also the oilseed index ranged well below last season’s corresponding value. By contrast, the meals index remained conspicuously high in historic terms.
Oilseeds and meals:
With regard to the price indices for oilseeds and meals, drops in international soybean and soymeal values were partly compensated by rising rape and sunflower seed/meal quotations. Soybean prices have declined month-on-month in response to generally favourable supply prospects for the 2013/14 crop. Better than earlier anticipated yields were reported for the advancing US crop harvest; in Brazil, weather has been favourable for plantings and early crop development; and the arrival of rains allowed sowings to start in Argentina.
Several factors prevented world soybean prices from falling more pronouncedly, notably: continued strong import demand (especially by China), downward revisions of India’s soybean crop (as heavy monsoon rains led to losses), and continued dry conditions in certain parts of Argentina. Markets will likely continue to be characterized by uncertainty and price volatility until final estimates for the US crop become available and crops in South America are fully established.
As to rapeseed, although the overall 2013/14 outlook points to ample supplies, during October, prices have strengthened mostly reflecting strong global demand, in particular firm export demand from China. Private sector reports putting Canada’s 2014 canola output below official estimates and unusually wet and cold weather slowing down rapeseed sowings in the Russia Federation and Ukraine also lent support to prices. Global sunflower availabilities are expected to improve markedly compared to last season, but cuts in Argentina’s 2014 crop forecast (due to recent dry weather) resulted in lower global projections, explaining the recent firming in international prices.
The further strengthening in the vegetable oil price index was mainly driven by palm oil: international quotations for the commodity have risen by about 5 percent reaching a 13-months high. The upturn in palm oil prices followed reports of lower than anticipated output levels, combined with indications of firming world import demand and concerns that overly wet weather could negatively affect production in the coming months in Southeast Asia. Imports by India have grown as the festive season approached and because of depreciations in the Indian Rupee. And in China, positive economic data translated into growing demand for food and non-food uses. Higher EU purchases of both palm and rapeseed oil – mostly for biodiesel production – also supported prices. The EU’s likely application of high anti-dumping duties on biodiesel imports from Argentina and Indonesia is expected to stimulate domestic biodiesel production. International soyoil prices (which carry a relatively low weight in the overall index), on the other hand, have fallen by about 4 percent, in line with significantly improved global supply prospects for soybeans in 2013/14.